The value of remortgaging in the UK increased by 21% year on year in 2016 reaching £65.7 billion with home owners doing so more often, new research shows.
Remortgage enthusiasm was driven by record low rates, anticipation of a rate rise in 2017 and the decision by the UK to leave the European Union, according to the study from conveyancing service provider LMS.
The total number of remortgages in 2016 hit 384,950, an increase of 15% from 333,400 in 2015. Over the course of a year the difference is equal to almost 4,300 additional remortgages each month.
The data shows that the number of home owners remortgaging in November 2016 alone rose to 36,850, the most in a single month since July 2009 and they remortgaged two month more frequently last year than in 2015.
The research also shows that after remortgaging activity plummeted due to the financial crisis, decreasing 55% in value and 52% in volume between 2008 and 2009, it has now rebounded significantly.
Compared to 2010, when remortgaging reached its lowest point of £40.1 billion in value and 319,300 by volume, activity has increased by 64% to £65.7 billion and by 21% to 384,950 in 2016.
The average frequency with which homeowners remortgaged in 2016 was four years and nine months. In 2015, the average frequency was four years, 11 months, some two months less frequently than in 2016.
The firm says that this is a sign that home owners capitalised on the record low rates that were available throughout the year to reduce their monthly outgoings. LMS data found that 89% of remortgagors were able to lower their monthly mortgage rate and one in five lowered their monthly repayments by up to £500.
When surveyed, 66% of people who remortgaged in November plan to remortgage again within the next four years in a bid to keep capitalising on the low rates available.
According to Andy Knee, chief executive of LMS, last year was one of turbulence. ‘But it has been a positive one for remortgaging, which bounced back from the slump it encountered in the wake of the 2008/2009 financial crisis, and is now 64% more valuable than in 2010,’ he said.
‘Remortgaging was driven by record low rates throughout the year, enabling home owners to make substantial savings to their monthly outgoings. Anticipation of interest rate rises in recent months have also encouraged more people to remortgage with many opting to fix for longer,’ he explained.
‘We’re already witnessing surging where the last lender to raise rates experiences huge application volumes as buyers desperately try to take advantage of the lowest rates. Ten year fixed term mortgages are also becoming increasingly popular as people seek longer term security while the terms of Brexit continue to be thrashed out,’ he pointed out.
However, he warned that in 2017 the industry expects lenders to start raising the rates they have on offer and that view is reflected among borrowers as 32% now anticipate a rate rise in the next year.
‘The full impact of the EU referendum is still waiting to be felt in most areas of the economy, including the mortgage market. We expect confidence to fluctuate in March if Article 50 is declared, as expected. Rising inflation will apply added pressure to household budgets, so any way to reduce outgoings, such as remortgaging, will be welcome relief to many families who start to feel the squeeze,’ Knee added.
